Comparative Statics for a Partial Equilibrium Model of Investment with Wicksell-Complementary Capital Inputs

Anthony Horsley and Andrew Wrobel

STICERD - Theoretical Economics Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: A partial competitive equilibrium model is set up for the determination of profit-maximising investment in a production technique which has constant returns to scale itself, but at least one of its inputs has an increasing price schedule, so that its price is determined in equilibrium. Comparative statics analysis of the solution shows that the cross-effects of unit input costs on equilibrium investment are negative if the inputs are Wicksell technical complements. This is so in the motivating application (pumped storage, especially of energy), since this is a two-input example. For the case of just one equilibrium-priced input, a shift in its price schedule changes the scale of investment but not input proportions (with or without the complementary assumption). When applicable, this result greatly simplifies the re-optimisation of existing plants tied to particular locations.

Date: 1996-01
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cep:stitep:/1996/302

Access Statistics for this paper

More papers in STICERD - Theoretical Economics Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE
Bibliographic data for series maintained by ().